If you are having problems....or have no clue about the markets whatsoever.....this may help you, i can relate. First off, i am a new trader also.....i believe i have the record for being the dumbest, most foolish person ever to take up this profession. If you are starting out like i did...take heed...there is hope! I started this 2 years ago. And most of that time, i've been trying to figure out why so many people fail at this. To give you an idea how out of it i was...i figured all you needed to make money in the stock market was an account, a computer, and online access and thats it...you can just quit your day job and start raking it in. (I quit my job) You can imagine to my horror and disbelief when i began reading that it doesn't take a few months to learn the ropes....but years. Worse yet....95% of everyone that starts this...eventually will fail. I was so heart broken i wanted to unplug the computer and close my account ....never to think about trading again. But for some reason i decided it was better to try and fail, then to never to have tried. So if you ever plan on making it someday...you must have the heart for it. OK............heres the deal, the markets are like lions, they are not good nor evil, they just simply feast on the weakest prey. Your job is to stay hidden in the tall grasses long enough so that your lil legs build enough strength so that you can run and keep up with the herd....thats how you will learn! What i mean by this is....risk control....money management...its simple math!! In the beginning, sound money management is not just important....its critical to keep you in the markets until you acquire enough experience to make some money. Forget about making money in the beginning....you need to worry about your money management. I cant stress enough how important this is. Its because of sound money management im still here today. RULE #1: Losses....you must not fear them, or it will mess with your mind...clouding your judgement. RULE #2: Losses....you must fear it like the wrath of God!....or you will be out of this game before you even see it coming. I remember one of my first trades i made....i had no clue...after i figured what button to hit to buy a stock...i promptly saw my stock take a dive....i was down $1000.00 in 10 minutes...then $2000....$3000....after about 30 minutes i couldn't take the pain any more got out with a $4200.00 loss. Odd.....i remember afterwards not being overly concerned about what just happened.... i remembered reading an article about Dan Zanger on how he commented that everyone should wipe out at least once if they are ever to go on and become great traders. I figured "cool" im on my way to greatness............................i was fool. NOTHING, NOTHING is more important that capital preservation!! Once its gone....you're out! You need to stay alive long enough to learn this game..... only way to do it is with strict sound money management....and the discipline to follow it. Listen....this is so important....i had 14 losing months in a row......last 3.5 months was able to win back ALL my money i had lost plus tack on a few grand on top! WOW my batting average must be like 80 or 90% lately right?......its only 42% folks. Forget the idea that you need to have a high batting ave to make $$....someone with a 30% BA can clean the clock out of someone with 70% BA!! Its a combination of both BA and win/loss ratio that matters.....and something you will never stop trying to improve. It can only be done by sound money management! (During the 14 losing months....i never risked more than .02 to .04% of my capital....swing trading.) Yes...losses are part of making money....but ONLY when its an acceptable predetermined amount outlined in your trading plan. I don't have to tell you that before you enter a trade, you should have a predetermined entry, stop, and target, don't TAKE THE TRADE IF IT doesn't FIT YOUR MONEY management PLAN! EX:...Risk/reward ratio...is it acceptable? Position size........can i buy x amount of shares with this stop size? You need to have a max amount of $ your willing to lose for that trade...AND max amount of shares you can buy depending on stock price. Just because your plan calls for a stop loss no more than say...$200 per trade, doesn't mean you can always risk that amount, you may have to scale back depending on price of the stock for safety. (Ex: $20 stock gapping against you 10% one morning...vs a $80 stock gapping against 10% . Your trading plan should have all these rules laid out before hand. If you find these rules to be boring or unnecessary.....you will be the lamb walking towards the lions mouth. I could go on and on about money management..... Next;....looking for / asking around older, successful traders for their exact specific way they make money.....FORGET IT! I remember being in some chat rooms...some traders would be making 10k or 25k in a week.....they wouldn't give me the time of day. They ones that were nice enough to talk would always say the same thing......"you must find a method/ style that works for you"......SCREW THAT.....its working for you.....your making tons of money with it...tell me...tell me!! I just didn't understand.................... I didn't understand what was meant by finding a method that works for you...not someone elses. Just like i didn't understand why for 14 months i couldn't make money...at best come close to break even.....(not realizing how lucky i was to be using sound money management which always kept my losses tiny.) Just like i didn't understand that buying more monitors....using more sophisticated platforms (when the one i was using was already over my head)....would NOT be the trick to money coming in. Everyone thinks...processes information differently.....what works for one guy may not work for you! Its true....YOU MUST FIND THE METHOD / SYSTEM WILL WORK FOR YOU! The biggest obstacle in the way....is that you have to try so many different things to find the right one for you.....while trying to survive the mind games that are played everyday. Markets will make you sell when you should be buying....buy when you should be selling...etc. (After i got out with that $4200 loss....the stock rallied right back up!) The market is covered with traps for newbies! If....and only If, you survive long enough and become wise to the markets little tricks and traps...guess what...market has more sophisticated high-end traps for you....its an endless cycle....no one ever stops learning....if you think you figured out the markets and don't need to learn anymore...you will be left behind....quickly. The road to becoming consistent is very long and difficult. I have almost 4 wining months in a row that are winners......thats not consistent.....4 months isn't squat. Its not even a spec.....think about that if you just entered the markets for a few weeks or months. Its sooo tedious in the beginning....boring paper trades...by the hundreds for months at time.....while hearing how everyone else but you is making money.....you must have the heart and the patience to do the work in the begning. Only a fool jumps right in expecting positive results. Even if you had the best computer...the best broker...the best platform...knew all the chart patterns...YOU WOULD STILL LOSE....because you would be lacking the experience. If your just starting out...and you already found this site ......your very lucky. This is an important site. Why?....Because it has resources that allow you to see and evaluate so many things at once. It prevents you from getting an early idea or method implanted in your head like a baby duck (a reference in one of the Market Wizards books) and believing thats the only way....and not be able to adapt or change with conditions later. Its fatal. Its what almost happened to me................hence my screen name I recommend all new traders help other new/ or newer traders...give them a guiding hand...you will be helping yourself more than you realize. So......after 2 years of trading whats constantly on my mind??? 95% of everyone that tries this fails. Hope some of this was helpful to you new traders.
Excellent post... you have just about summed up the path to success in trading: 1) trade any positive expectancy strategy that you feel comfortable with and quit looking to others for theirs, cos you need to develop a strategy around you and your inherent psychological strengths and weaknesses 2) have a sound risk management plan, designed for long run survival 3) have the intestinal fortitude to trade through your inevitable drawdowns (which takes us back to point 2 above) 1) to 3) is the Holy Grail of trading... Everything else is just bells and whistles...
I believe this is why it is so important to read everything you can get your hands on, not because the way will be provided in a book or online, but the combination of all that has been written about will help you put the pieces together
Excellent post but sadly you will not find true support here in ET. The enviroment here is bitter and always aguementitive 90% of the time. If Bob says he is making $ scalping off 123's on the NQ , John will call him an idiot because scalping is stupid. I just don't get it? Why not say great Bob congrats, I'm a swing trader that trades trends or whatever! For some reason the traders in here are very weak minded towards different approaches to markets and ways of trading, they always feel threatened or fearful for some stupid reason, insecurity I guess. ET has improved recently but it's still far from a helpful place for new traders.
This has been one of the best threads I have seen since becoming a member in 2004. lilduckling and Samson77, very very true posts.
Its easy to generalize trading and say that you should have rules... etc... The devil is in the details. Its actually formulating a plan that gives you an edge and following it. W/o an edge you will breakeven or make very less than the risk you are taking. Most people on ET dont have a real edge.. so they can follow all the rules they want.. at the end it wont matter. Daytrading futures or stocks is the most difficult edge to master in this market to justify the risk one is taking everyday.. and 90% of the people here are daytarders that are looking to scalp eminis.. go figure.
ET was intended for experienced traders. (do you mix elementary school students with college students?)